Germany, IMF insist no disagreement on debt

Germany and the IMF moved to paper over the cracks Saturday after days of differences on European austerity, as a key committee said spending cuts must be balanced with growth.

Berlin has appeared increasingly at odds with the International Monetary Fund, as Europe's paymaster stuck to its line that deficits must be trimmed while the IMF talked of giving troubled economies more time to balance their national chequebooks.

But in a press conference in Tokyo on Saturday, German Finance Minister Wolfgang Schaeuble insisted everyone was singing from the same song sheet.

"We are in complete agreement with the IMF, and especially with (Managing Director Christine) Lagarde, that in a mid-term view the reduction of too-high debt levels is completely unavoidable," Schaeuble told reporters.

"There is no disagreement about that at all; about the pace of the first steps and their size... but they must go in the right direction."

On Thursday, Lagarde said she was happy for Greece -- bleeding from the spending cuts demanded by international creditors -- to have two more years to meet its deficit-reduction targets.

The following day, Schaeuble said there was "no alternative" to slashing bloated national balance sheets, demands to which Athens and other troubled eurozone capitals have agreed in exchange for multi-billion euro bailouts.

In a separate news conference on Saturday, Lagarde also played down speculation of a split.

"There has been a lot of attention in the last few days to the issue of fiscal adjustment, a lot of debate," she said.

"In reality, what has been presented as disagreement is more about perception than reality.

"We all recognise that credible, medium-term fiscal adjustments are necessary in all advanced economies... (but) the pace and type of measures obviously need to be calibrated on a country-by-country basis... it cannot be one-size-fits-all."

She added that fiscal policy alone "is not sufficient".

"On these points, there was complete agreement," she said.

The show of unity came as a key Fund committee also strove to chart a middle-way between the fiscal hawks and the debt doves.

"Fiscal policy should be appropriately calibrated to be as growth-friendly as possible," the International Monetary and Financial Committee said in a communique.

The committee, made of up two dozen central bankers and government ministers who advise the IMF's board on its work, said there remained "substantial uncertainties and downside risks" to the global economy.

"Key policy steps have been announced, but effective and timely implementation is critical to rebuild confidence," it said.

"We need to act decisively to break negative feedback loops and restore the global economy to a path of strong, sustainable and balanced growth.

"Advanced economies should deliver the necessary structural reforms and implement credible fiscal plans. Emerging market economies should preserve or use policy flexibility as appropriate to facilitate a response to adverse shocks and support growth."

The communique said monetary easing -- like that practised by the US Federal Reserve and other central banks -- had been helpful, but it was vital that "credible medium-term fiscal consolidation plans" were put in place.

Calls for a moderation in the pace of fiscal tightening have grown over recent months, with sometimes-violent street protests in debt-laden European countries as joblessness grows and social welfare programmes are cut back.

Governments that have pressed regimes of austerity have paid the price at the polls and politicians have proved increasingly reticent to stick to harsh deficit targets.

There are also growing fears that cuts are acting as a drag on the global economy.

The IMF's latest world economic growth forecast, released this week, made dismal reading, with the rate of growth for the year cut to 3.3 percent, down from its July estimate of 3.5 percent.

The pace of growth next year would also be moderated, forecasters said, suggesting an expansion of 3.6 percent next year, also lower than a July estimate of 3.9 percent.

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